DJIM #24, 2009

Treasury auctions, oil over $70, 10 yr TSY/ USD weakness/ interest rate jitters, optimistic Eco'. data points.... Oh yes!...we had a lot of fluff last week.    We had some news where Bears point out that the market is doomed and we had some news which suggest market ought to rally higher.   At the end,  we ended up flat at the end of the week with 950SPX staying as formidable resistance.   Also,  important is for the SP financials/ XLF to get over 200MA for any resumption of this rally, most likely.     So, a lot of fluff, but no real action?    Are we truly at a tough stand off, equilibrium point?   Does that mean this market has fully priced into every conceivable notion, idea of every market participant?.   Well, the credit markets are outperforming the SP by a wide margin since Lehman default days (usually moves in tandem), suggesting we have further to go.  It just may be later than sooner.

So folks,  the long and short end of this is that 'we have only been at it for merely TWO weeks'.   What's 10 trading days of this after over a year of 5% speedy swings.  It just doesn't mean that kind of volatile trend would continue forever.    Maybe, folks out there just can't accept a serene market after all the turbulence.    It's not going higher and it's not coming down, either.   What to do now?

We wait!    We simply wait this holding pattern out and respect the fact with caution that we‘ve lost momentum.  The smoothness and speed of this rally finally showed it's unsustainable over the past 10 trading days.   As far as the strategy lately, we know where to pick up a little stuff near SPX 920-924 and we know where to back off or sell a little stuff near SPX 950 or so.     Even though, we are still very much bullish longer term on this market, we want/ need to see a major catalyst/volume to have a chance to drive this market higher.   We need to respect the probability of a profit taking correction finally from those participating since March to allow latecomers a chance now to get in.    Considering,  we've been those early birds here at DJIM,  we see no need to get too caught up and over analyze this holding pattern.  We'll let it be.. Remaining selective/ rotating in stocks/ groups if an opp' arises.    A pause is still okay when the trend is up.

Bottom line,  this is typical summer trading pre-2008 and we do not expect daily excitement from this market.   When the trading pace is slower than usual,  we have to adjust our strategy as well as our expectations.